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Hickenlooper budget calls for PERA fix from members

$28.7B budget includes increase for higher ed, more money for reserves

By Brian Eason and John Frank

The Denver Post

Posted:
11/01/2017 09:43:25 PM MDT

Colorado Gov. John Hickenlooper on Wednesday unveiled a budget plan that calls on retirees and public employees to bear the brunt of looming changes to the state pension fund, arguing that taxpayers have already contributed enough to the retirement system in recent years.

The $28.7 billion spending road map — a 3.6 percent increase over this year — also calls for a 3 percent pay hike for most state employees, a sizable boost to higher education spending aimed at reining in tuition costs, and for socking away more money in the state's reserves, which lawmakers have been dipping into for years to make ends meet.

First elected in 2010, the term-limited Hickenlooper's time in office will come to a close at the beginning of 2019. Already, he's facing an exodus of Cabinet members — but earlier this week he pledged to finish his time in office on a high note.

"I want to make sure that we've got a strong team, all hands on deck. We're going to go out there and knock it out of the park," Hickenlooper said. "We're going to get a ton of stuff done in this last year."

State lawmakers are under no obligation to adopt the governor's annual budget blueprint, but the document sets the tone for what he'd like to get done as his time in office draws to an end.

One thing it doesn't do is go along with spending cuts that Republican lawmakers want to see.

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In a wide-ranging spending bill approved in the 2017 session, Colorado lawmakers forced most state agencies to submit budget proposals with a 2 percent cut for the next fiscal year. But the governor's office only needed to "strongly consider" the suggestions. Hickenlooper told lawmakers in his budget letter that he looked at the proposed cuts but endorsed across-the-board increases after taking into account "various pressures on spending and needs throughout the state."

Hickenlooper noted that money to reduce the ongoing debt to education spending, known as the negative factor, and the diversion of money to reserves exceeded the $117 million in cuts that Republican lawmakers wanted to see in the budget.

Two of the most significant pieces of Hickenlooper's plan — building up the reserves and the pension reforms — appear to reflect a desire to leave his successor a solid financial foundation to build upon, after the governor endured years of wrenching decisions on spending.

Rejecting the Colorado Public Employees' Retirement Association's plan to increase government contributions to shore up the fund would save the state $54 million a year, according to PERA projections.

But it injects a new wrinkle into what was already set up to be a bitter fight over PERA's future, with the pension fund facing its second fiscal crisis this decade. The Democratic governor's opposition to increasing taxpayer contributions mirrors that of many Republicans and is likely to encounter resistance from public employee unions and Democratic lawmakers as the 2018 session approaches.

Instead, Hickenlooper proposes increasing employee contributions by 2 percentage points starting in 2019 — a year earlier than the PERA board had recommended. That would provide some relief for current employees, whose contributions would have increased more under the board plan.

It also calls for retiree cost-of-living raises to be capped at 1.25 percent, down from the 2 percent they receive annually now. That's an additional cut of 0.25 percentage points from the board's proposal.

Henry Sobanet, the governor's budget director, on Wednesday said the governor's office would be open to automatic taxpayer contribution increases down the road if this round of reforms proves insufficient.

Additional taxpayer contributions, Sobanet said, are "not off the table — rather, off the table for this first step."

The governor's budget also calls for establishing a new, 7 percent statutory reserve, up from the 6.5 percent required by law today. To meet that target would cost $155 million, the first $77 million of which is needed to back-fill an existing shortfall.

"If we're not saving money during an upswing, during the next downturn, we're going to be that much worse off," Sobanet said.

The governor's office reported its budget proposal at $30.5 billion, but it includes $1.8 billion in double-counted dollars, making the actual total request $28.7 billion. It represents a 3.6 percent increase from the $27.7 billion appropriated in fiscal year 2017-18.

One of the largest increases in annual spending is for higher education, where the governor wants to spend an additional $87 million, or 10 percent, to keep tuition hikes to just 3 percent on average for Colorado residents. The additional dollars are part of a multiyear initiative to keep college affordable, the governor's office said. About $14 million in new spending would go toward financial aid, with most dollars earmarked for the neediest students.

For K-12 education, Hickenlooper is proposing a 4.5 percent increase in per-pupil spending, part of an $85 million increase in discretionary spending on schools. In addition, the budget plan asks for $10 million in marijuana tax money to lure educators to rural school districts experiencing a teacher shortage.

The expected increase in inmates next year will cost the state $20 million to contract with private prisons and state facilities. The budget plan also earmarks $2.6 million for additional guards at youth prisons and another $6.1 million for 100 new child welfare case workers.

In a statement, House Speaker Crisanta Duran, D-Denver, praised the budget request, saying she was "glad to see important issues like K-12 and higher education leading the governor's budget priorities."

Republican lawmakers did not immediately respond to requests for comment.

Hickenlooper's budget represents the start of a six-month process to develop the spending plan for fiscal year 2018-19. The governor will present his recommendations to the bipartisan legislative budget committee Nov. 13, but it's unclear how much of the plan the three Democrats and three Republicans on the committee will embrace.

The governor is asking lawmakers to restore money for two programs cut in the 2017 session: $3.1 million for the Colorado Energy Office and $1.25 million for incentives to lure television and film productions to the state.

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